Credit report bureaus start compiling a credit report on you as soon as you open a bank account, apply for credit or make certain other financial transactions. You cannot stop them from doing this or from providing your information to creditors when you apply for an account. Fortunately, federal law gives you certain rights that provide some power over the bureaus.
Definition
The Fair Credit Reporting Act (FCRA) is a federal law governing how information is reported in credit files by the consumer credit reporting bureaus. It was originally passed in 1970, although it has been amended since then, and it is enforced by the Federal Trade Commission (FTC). CreditReporting.com, a credit score and monitoring website, explains that this includes TransUnion, Experian and Equifax, which are the three major bureaus, and some specialty agencies that provide data on things like check writing history or rental records.
Function
The main function of the FCRA is to let consumers monitor the information in their credit reports and challenge outdated or incorrect items. The law spells out how disputes can be filed and how they must be handled by the bureaus. It gives consumers free yearly access to their reports. Consumers may also get their credit scores, but the bureaus are allowed to charge a fee for this service.
The FCRA has other functions, like allowing consumers to opt out of pre-screened credit card and insurance offers and to prevent employers from getting a credit report copy without express permission. It requires lenders to give a reason when they turn down an application and to disclose where it got the information it used in its decision. It lets consumers get a free report from that bureau to double check the accuracy of the negative information. Free reports are also mandated by the FCRA for people who place fraud alerts on their reports. Additionally, it lets consumers sue the credit bureaus and certain credit report requestors for violating the law.
Time Frame
The FCRA sets a time frame for many credit reporting activities. It has an amendment that lets consumers request a free credit report every 12 months from all three major bureaus through a special website, AnnualCreditReport.com. It sets a 30-day limit on credit bureau investigations when consumers allege that their reports contain errors, according to the Federal Trade Commission (FTC). The bureaus must remove the disputed items if they cannot verify their accuracy within that period. Credit Infocenter, a credit repair self-help website, explains that there is also a time frame for reporting negative items. Most must be removed after seven years, although certain bankruptcy types can be reported for 10 years. Consumers may demand the removal of old items if they do not drop off their credit reports automatically.
Benefits
The FCRA has many benefits for consumers. It gives them the power to repair their own credit by monitoring it for inaccuracies and forcing the credit bureaus to remove them. It allows them to know which bureaus are reporting negative information that results in denial of a credit application, insurance policy or employment. It gives them a legal remedy against bureaus that willfully violate the law.
Additions
The FCRA is a federal law that is valid in all 50 states. CreditReporting.com states that many individual states have their own specific consumer reporting laws, which may be more stringent than the federal regulations. You can find out about your own state's laws from the attorney general's office or local consumer protection agencies.
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